UK Q1 GDP Growth Rate Weakest In 1 Year

The UK economy advanced 0.2 percent on quarter in the three months to March of 2017, unchanged from the previous estimate, and following a 0.7 percent expansion in the previous period. It was the weakest growth rate in one year, as household spending slowed while business investment rebounded. On the production side, growth was driven by output from the business services and finance, and construction industries, partially offset by declines in some consumer-focused industries.

Gross fixed capital formation grew by 1 percent (from 0.1 percent in Q4 2016), boosted by a rebound in business investment (0.6 percent from -0.9 percent in Q4) amid positive contributions from other machinery and intellectual property products; partly offset by other buildings and structures. Also, government spending expanded by 0.7 percent after showing no growth in Q4; while household expenditure advanced by only 0.4 percent, the lowest quarter-on-quarter growth since Q4 2015, after rising by 0.7 percent in the previous period.

Imports jumped 1.7 percent following a 1 percent decline in the previous period, with a notable contribution from transport equipment, machinery and chemicals; while exports shrank 0.7 percent after climbing by 4.6 percent in Q4. As a result, the trade deficit widened to £13.7 billion from £10.0 billion in Q4.

From the production side, the service industries increased by 0.1 percent following a 0.8 percent gain in Q4. The main contributor to the slowdown in services was the distribution, hotels and restaurants sector, which decreased by 0.6 percent (2 percent in Q4), dragged by retail trade and accommodation services partly due to rising prices. Also, the transport, storage and communications industries decreased by 0.8 percent (0.8 percent in Q4). Meanwhile, output rose for business services and finances (0.5 percent, the same pace as in Q4) and government and other services (0.4 percent from 0.3 percent). Industrial output increased by 0.1 percent (0.4 percent in Q4), as output expanded for: manufacturing (0.3 percent from 1.2 percent in Q4); mining and quarrying, including oil and gas extraction (1.5 percent from -6.9 percent); and water supply and sewerage (1 percent from 0.9 percent). By contrast, output from electricity, gas, steam and air conditioning supply fell 4.2 percent (from 4 percent in Q4). Construction output advanced by 1.1 percent, following a 1 percent gain the previous period; and agriculture increased 0.1 percent, after a 1 percent growth in Q4.

Compared with the first quarter of 2016, the GDP grew by 2 percent, also in line with the previous estimate.

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